As the Turkish economy continues to grow and the country
transforms itself into a regional economic hub, Turkish companies
have already started to invest significant efforts in improving
their management structures and strengthening corporate governance.
The latter is nothing short of an imperative for companies, due to
their increased need for access to foreign funds as the result of
high economic growth rates and intensified competition.
Turkey already has a strong regulatory framework for corporate
governance. However, the reforms that have been implemented by the
Capital Markets Board (CMB), in line with the International
Monetary Fund's recommendations and the establishment of strict
auditing and accounting standards, are major milestones for better
corporate governance in Turkish companies. The CMB's later
requirements for companies have strengthened the oversight
functions of company boards. However, in contrast to previous
non-binding regulations, the new CMB rules are compulsory. In
particular, the compliance report that companies must issue with
regard to corporate governance principles is a huge step towards
better corporate governance.
The CMB also provides the necessary legal framework for
stakeholders to access extensive information about firms. According
to the new regulation, which obliges companies to issue a
compliance report in line with the CMB corporate governance
principles, stakeholders must be informed of company policies and
procedures that will affect the protection of stakeholders'
rights, and mechanisms that will provide stakeholders with
opportunities to participate in company management must be
developed. The compliance report also has a separate section in
which it should be stated whether a unit managing relations with
stakeholders has been established inside the company. If such a
unit has already been established, the names and roles of the staff
must be disclosed, as well as the number of explanations that have
been given by this unit to the stakeholders. If such a unit has not
yet been established, the reasons for such failure must be stated.
The report will also include the efforts that have thus far been
spent on compliance with the corporate governance principles. If a
company fails to comply with the principles adopted by the CMB, it
must state the reasons for its non-compliance in the compliance
The CMB's efforts to improve corporate governance standards
in Turkey are not confined to better auditing and accounting
standards, but also impose higher transparency standards on
companies. The CMB has decided to inform investors about the fiscal
status of companies and taken the decision to scrutinise the
salaries of chief executive officers who are working for companies
listed on the Turkish Exchange Market. It will fine companies if
they fail to disclose the necessary information to the
In line with the CMB regulation, the compliance report must
include a section on conveying information about the firm to the
public. The compliance report obliges the firm to disclose the
names and roles of the people in charge of such public information
policy. The report also requires companies to state whether they
have their own websites and, if not, to state the reasons for such
non-existence. The list of people whose activities might be
considered insider trading must be disclosed to the public; if this
list has already been shared with the public, this must also be
stated in the compliance report. If the list of names has not yet
been disclosed to the public, the reasons for this non-compliance
with the CMB regulation must be stated.
Finally, the compliance report obliges companies to state openly
whether the mission objectives and vision of the company have been
disclosed to the public, and whether the board members agree with
such mission objectives and vision. If this information has not yet
been revealed to the public, the reasons for this failure to comply
with the CMB compliance report must be stated.
Originally published in ILO, November 04 2013.
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